The Internal Revenue Service (IRS) offers taxpayers several alternatives to make their federal taxes, including Direct Pay, debit or credit cards, and digital wallets. Knowledge of these alternatives ensures timely payments and secure transfers, which save taxpayers from paying potential penalties and interest.
Direct pay: Secure bank account transactions
IRS Direct Pay allows taxpayers to make federal tax payments directly from a savings or checking account at no charge. Direct Pay can be applied to pay many tax forms, including balance dues, estimated tax payments, and installment agreements. One can schedule payment up to 30 days ahead, and the user can modify or void a future payment until two business days before payment.
Debit cards, credit cards, and mobile wallets
The IRS makes payment by credit or debit cards and electronic funds like PayPal and Click to Pay. The payment is made over the internet or by phone using IRS-approved payers. One should note that the IRS charges no fee on these transactions but the payment processors charge processing fees, and the fees vary based on the processor and the value of the payment.
Electronic federal tax payment system (EFTPS): general payment system
Electronic Federal Tax Payment System or EFTPS is a United States Department of the Treasury free service. The service allows businesses and individuals to pay federal taxes electronically from their bank accounts. Upon enrollment, the users can program payments up to 365 days in advance and check payment history. It is useful for most corporations with federal tax deposits and other payments.
Other ways to pay
Besides electronic payment, the IRS also accepts the following payments by:
- Same-day wire: Banks can wire money to the IRS on the same day for taxpayers. A bank charge can be imposed.
- Check or money order: Payment can be sent directly to the IRS. Information substantiating the payment, including the taxpayer’s name, address, day-time phone number, Social Security number, tax year, and the related tax form or notice number, should be included.
- Cash: Cash payments can be made at some retail partners. Taxpayers can find instructions and locations on the IRS website.
Payment plans and installment agreements
For taxpayers who are not able to pay their tax bill in one payment, the IRS provides payment plans, or installment agreements. Taxpayers can make payments in installments with these plans. Depending on the duration of the agreement and how the agreement is established, there could be a fee. An example would be to have an online direct debit installment agreement that has a reduced setup fee compared to other alternatives.
Considerations and recommendations
In making a payment choice, taxpayers must consider:
- Processing fees: While Direct Pay and EFTPS are free services, debit card or credit card and digital wallet payments have processing fees levied by third-party processors.
- Scheduling flexibility: Direct Pay allows scheduling payments 30 days in advance, while EFTPS allows scheduling 365 days in advance.
- Security: Whatever the IRS recommends as the way to pay is secure. Nevertheless, taxpayers are also encouraged to look for whether they’re on reputable IRS sites or certified processors so that they may ensure their personal financial data safety.
Payment should be made in time to avoid penalties and interest. Taxpayers are advised to select the correct mode of payment based on their economic condition and personal desire. Visit the official IRS website for proper guidance and payment.
